News conference discussing the indictment against Todd and Kevin Morgan and two business associates.
Shawn Dowd, Gary Craig

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A federal agent leaves the offices of Morgan Management LLC as they conducted a raid and collected items from the building for an investigation. (Photo: JAMIE GERMANO, @jgermano1/Staff Photographer)Buy Photo

The current criminal case alleging wrongdoing by relatives of area developer Robert Morgan has led to many questions about the criminal charges and the possible impact locally. Here are some of those questions, and the answers as best as can be provided now.

What is this "Bob Morgan" criminal case all about?

To be fair, Robert "Bob" Morgan, one of the Rochester region's most prominent developers and an individual with a foothold in major area projects, has not been accused of a crime. That said, his nephew, Kevin Morgan, and Robert Morgan's son, Todd Morgan, are accused of wire fraud and bank fraud, and both — until a recent suspension from the company — were active officials with Morgan's company, Morgan Communities. Their alleged crimes stem directly from those jobs. Kevin Morgan was a vice president with the company, and Todd Morgan a project manager. The two were suspended without pay after a federal criminal indictment was handed up against them on May 22.

No. Also accused of wire and bank fraud are Frank Giacobbe and Patrick Ogiony. Giacobbe owns Aurora Capital Advisors LLC, a Buffalo-based mortgage broker, and Ogiony works as managing director of the firm. Aurora was often the middleman, so to speak, between Morgan Communities and lenders.

So, now that we know who's accused, what again are they actually accused of doing?

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Robert Morgan, CEO of Morgan Management, talks with a reporter after the press conference to announce plans for a performing arts center on Parcel 5 in Rochester in April 2017.
Tina MacIntyre-Yee/@tyee23/2017 file photo
Robert Morgan, ceo of Morgan Management, talks with a reporter after the press conference.(Photo: TINA MACINTYRE-YEE, @tyee23/staff photographer)

Let's start "macro" and then go "micro." On the grander macro scale, they are accused of duping lenders into giving Morgan Communities money that the financial entities otherwise likely would not have parted with.

Typically, the owners of apartment complexes will seek not only short-term financial assistance with construction but also later loans for operation and improvement costs. When considering whether to provide money to an existing apartment project, lenders of course want to know that the project is stable. They look at the percentage of units rented, the rental rates and the debt-to-income ratio for the project. Much of this information is provided in what are known as "rent rolls," which the conspirators here are accused of falsifying.

In all, authorities allege that hoodwinked lenders provided loans totaling $167.5 million for seven different properties; two are in Buffalo, one in Avon, one in Syracuse, two in the Pittsburgh area and one in Canonsburg, Pa., which is southwest of Pittsburgh. The largest loan was nearly $46 million for the Rochester Village apartment complex in Pittsburgh and the smallest was $6.3 million for Avon Commons in Avon.

Are there any Rochester properties at issue?

Kevin Morgan(Photo: Gary Craig)

So far there have been no allegations of malfeasance with properties in the Rochester region. The investigation, however, is ongoing.

How were these crimes allegedly pulled off?

Now for the "micro" dissection. Thus far, the 62-count indictment and an application for a search warrant of the business email accounts of Kevin and Todd Morgan provide the most detail about the alleged wrongdoing.

The alleged skulduggery included inflating the value of apartment projects with falsified information about how many people resided there. In some cases, prosecutors say, the alleged conspirators submitted fake documentation to property appraisers, convincing the appraisers that apartments were significantly more valuable than they really were. Those appraisals then became the centerpiece of loan requests.

In two cases, Giacobbe and others allegedly conjured up fictitious loans — one for $3.5 million, the other for $1.4 million — and persuaded lenders to roll those sums into the amounts the Morgan company was refinancing.

In another case, in December 2016 Giacobbe allegedly told a lender for a Pittsburgh property that the apartments were more than 95 percent occupied. Three months later an employee of the complex, unaware of the earlier claims, sent an accurate report to the lender that showed less than 70 percent of the complex was occupied. Kevin Morgan then tried to explain the discrepancy to the lenders, authorities say.

Also among the specific allegations are:

• "Staging" properties so it appeared to visiting inspectors that unrented units were occupied.

• Inflating the income from apartment storage units. In an email, Giacobbe asked Kevin and Todd where an extra $72,000 in storage unit income came from, and Kevin replied, "Magic," authorities allege.

• Trying to falsify radon tests by placing the testing mechanism near an open window of an upper-floor apartment, instead of in the basement where reliable testing is done.

• Arranging for cars to be parked in a complex garage so it appeared there were more tenants than there were.

Do authorities suspect others were involved?

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Robert Morgan talking in a group outside his office on Pittsford-Victor Road in Perinton, as federal agents were collecting items inside. Morgan is CEO of Morgan Management LLC, which handles many projects in the Rochester and Buffalo markets.(Photo: JAMIE GERMANO, @jgermano1/Staff Photographer)

Federal authorities don't tend to discuss where an investigation might lead, and this case has been no exception. However, court papers hint that at least one other person is suspected of involvement, is clearly known to authorities, and may be cooperating with prosecutors.

The indictment notes the existence of a "co-conspirator, known to the Grand Jury," which likely means he or she testified before the grand jury that handed up the indictment against the four. The search warrant for emails also included information from earlier emails detailing part of the alleged fraud. It's possible that a co-conspirator handed over these emails, or that authorities ferreted them out with an earlier search that has not been made public. (The media and public only learned of the recent email search when court papers were accidentally posted online. Those papers are now sealed and not accessible by the public.)

It's also possible that this entire investigation started with information from a competitor or colleague of the accused. Asked about that possibility, U.S. Attorney James P. Kennedy Jr. declined to answer (which, again, is not an unusual response at this point in time).

Why is everyone making such a big deal out of this?

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Robert Morgan is a prominent real estate developer from Rochester NY,
whose companies are under investigation by the FBI. (Sept. 26, 2017)
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Well, first, the government is alleging a very large, brazen fraud. But beyond that, it has to do with the company involved.

Bob Morgan, who once worked in his family's South Plymouth Avenue fish store, started Morgan Management in 1979 as a small-time investor in commercial property. Today, the company is the largest private-sector property owner in Monroe County, with more than $250 million in apartment complexes, office buildings, shops and other commercial structures in its Monroe portfolio.

The company website lists 67 apartment complexes in Monroe County alone. The company also has become a major player in the downtown development scene, and has its hands in the proposed theater-residential complex at Midtown's Parcel 5, Tower 280 in Midtown, redevelopment of the Alliance and Gannett buildings and the new riverside apartment building that will loom over Dinosaur Bar-B-Que.

Beyond Monroe County, Morgan Management has 34 residential developments elsewhere in upstate New York and 60 complexes spread over 11 other states, according to its website.

Are those apartment complexes in danger of closing?

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Robert Morgan and his attorney John Speranza leave Morgan's office on Pittsford-Victor Road in Perinton, as federal agents were collecting items inside the building on Monday, May 14, 2018. Morgan is CEO of Morgan Management LLC, which handles many projects in the Rochester and Buffalo markets.(Photo: JAMIE GERMANO/@jgermano1/Staff Photographer)

Certainly not at present. Prosecutors have said that Morgan tenants have no need to worry. Morgan has issued several statements emphasizing that his company is current on all its debt, meaning there is no immediate threat of anything dire like foreclosure. Indeed, a search of local public records related to Morgan Management show no hint of the foreclosures, liens, tax warrants, collection actions or other legal woes that often entangle cash-strapped businesses.

Is the investigation focused on any alleged criminal conduct in the Rochester area?

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Federal agents leave the offices of Morgan Management LLC as they conducted a raid and collected items from the building for an investigation. (Photo: JAMIE GERMANO, @jgermano1/Staff Photographer)

That's not known. While prosecutors have said their investigation has a broad focus, they haven't said anything that specifies a Rochester focus.

Spokesmen for Monroe County and the city of Rochester said they've not been served subpoenas and their officials have not been interviewed by investigators.

Both governments have been involved in the financing of numerous Morgan properties.

Since 2012, the county's industrial development agency has given property and sales tax breaks totaling nearly $65 million to 21 projects being developed by Morgan and, in some cases, corporate partners.

A number of locally active banks that have loaned money to Morgan — KeyBank, M&T, Canandaigua National and Lyons National — declined to comment when asked whether they had any contact with investigators.

What about all these deals?

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Robert Morgan and his attorney John Speranza leave Morgan's office on Pittsford-Victor Road in Perinton, as federal agents were collecting items inside the building on Monday, May 14, 2018. Morgan is CEO of Morgan Management LLC, which handles many projects in the Rochester and Buffalo markets. JAMIE GERMANO/@jgermano1/Staff Photographer

Robert Morgan talking in a group outside his office on Pittsford-Victor Road in Perinton, as federal agents were collecting items inside. Morgan is CEO of Morgan Management LLC, which handles many projects in the Rochester and Buffalo markets. JAMIE GERMANO, @jgermano1/Staff Photographer

The offices of Morgan Management LLC at 1080 Pittsford-Victor Road in Perinton. Federal agents raided developer Robert Morgan's office and collected items as part of an investigation. JAMIE GERMANO, @jgermano1/Staff Photographer

Robert Morgan talks in a group outside his office on Pittsford-Victor Road in Perinton, as federal agents were collecting items inside. Morgan is CEO of Morgan Management LLC which handles many projects in the Rochester and Buffalo markets. JAMIE GERMANO/@jgermano1/Staff Photographer

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Developers often borrow heavily to build their projects, and companies that buy commercial properties often borrow something extra to pay for improvements. What seems to be distinctive about Morgan companies is they borrow to an extreme.

Debt outstripped assessed value for all but one of 40 Morgan projects or purchases in the Rochester area examined by the Democrat and Chronicle, suggesting the properties were mortgaged for more than they were worth. In some cases, the debt was more than double the assessed value.

Does this mean company executives conned banks into loaning more money than they should have?

No. There are numerous explanations for the large debt-to-assessed value ratios the newspaper found. Assessments might be too low, for instance, or the company might have borrowed additional funds to replace a roof, install a new boiler or paint the swimming pool.

Will this impact Morgan projects?

At this point, the jury is still out. City Council voted down a $1.5 million loan to his Court Street apartment project back in November, with some members citing the FBI probe. The project is moving ahead without it.

Other projects, in Webster and elsewhere, do not appear hindered. At least not yet. A planned redevelopment of the former psych center off Elmwood Avenue is inexplicably stalled, as Morgan has yet to submit its plan for the Brighton portion of the project, town Supervisor Bill Moehle has said. But that goes back months, to when town officials asked for a proposal setting aside a portion of the housing for lower-income residents. Whether the investigation keeps the state from coming to the aid of a theater and housing project at Midtown’s Parcel 5 is uncertain. The state aid being sought would not directly benefit Morgan’s portion.

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Over the past week-and-a-half, the four accused of crimes all appeared in federal court in Buffalo and pleaded not guilty to the fraud charges. They were released with certain restrictions: They surrendered their passports; they can't travel outside of western New York without the approval of federal pretrial monitoring officials, and each agreed to what is known as a signature bond.

This is an instance in which the accused does not have to provide any cash or property to secure release. However, should a defendant fail to abide by court restrictions, or disappear before trial, authorities can seize property the defendant owns, sell it, and place the bond amount in the U.S. Treasury. The bond amounts were $100,000 for Ogiony, Giacobbe, and Kevin Morgan, though Giacobbe did also have to post cash or property valued at $20,000. The bond amount for Todd Morgan was $25,000. He is accused of fewer criminal counts than the other defendants.

What's next with the court case?

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The offices of Morgan Management LLC at 1080 Pittsford-Victor Road in Perinton. Federal agents raided developer Robert Morgan's office and collected items as part of an investigation.(Photo: JAMIE GERMANO, @jgermano1/Staff Photographer)

Fraud cases as sweeping as this one can seem to have an eternal lifespan in federal court. There are numerous reasons for this, a key one being the volume of evidence that defense lawyers have to sift through and scrutinize for pretrial and trial arguments.

For instance, one of the largest mortgage fraud cases in Monroe County started with indictments in December 2000 and ended with guilty verdicts at a trial in April 2003. In that case, the late Robert A. Amico and his two sons used fake mortgages and inflated appraisals in what was a $60 million mortgage-fraud scheme.

Right now, the schedule for the Morgan court case is this:

• The pertinent evidence secured by authorities must be given to defense lawyers by July 27 under what is known as the "discovery" procedure.

• Also, prosecutors have to provide the accused with proposed plea offers by Dec. 7, and the defendants must answer by Dec. 31.

• Defense lawyers have until Jan. 25, 2019, to file pretrial motions, which typically challenge the evidence against the accused.

• Prosecutors then have until March 15, 2019, to respond, and oral arguments over those motions are scheduled for March 27, 2019.